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Pie chart and bar graph on a computer screen in front of a magenta background showing Amazon reports and performance metrics.

The ACOS Amazon Trap: Learning the Right Metrics for Growth

Latest posts by Heather Eastman (see all)

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If you want growth on Amazon, you need to understand which ACOS Amazon metrics to track to improve ranking, impressions, page views, sessions, and ultimately, sales.  

Advertising cost of sale, or ACOS, is one of the most commonly used measures of success for Amazon marketing, but it is far from the only one. While there’s good reason ACOS is so often used as the north star, there are cases where blindly following ACOS can actually hinder progress to your goals – it all depends on the goal.  

In this blog post, we will look at how to create predictable growth on Amazon by learning how to interpret and respond to certain metrics. We’ll discuss which metrics to track, how to use these metrics to set performance-based goals, what actions you can take to boost performance, and how to know if your efforts are working.  

Which ACOS Amazon Metrics Should You Track? 

ACOS is essentially the relationship between your total ad spend and total ad revenue. In fact, to calculate ACOS, simply divide ad spend by ad revenue. 

You can use ACOS to determine your brand’s marketing profitability on a monthly basis. Evaluating Amazon pay-per-click (PPC) ACOS is very helpful for determining overall health and growth potential of your brand. Looking exclusively at this Amazon ACOS metric, here are a few signs your brand might be in trouble:  

  • Total channel revenue is down YoY 
  • Total ad revenue is down or flat YoY 
  • ACOS is rising 

 

Downturns in channel and ad revenue are self-explanatory, but a rise in ACOS points to inefficiencies in ad campaigns. There may be several causes for this, but the most common include lack of visibility, lack of engagement, and lack of conversions.  

Lack of Visibility 

Amazon Advertising reports can give specific information about traffic to your listings, such as keyword performance based on sales. This essentially tells you if the keywords you targeted brought customers to your listing who then made a purchase.  

You can also look at total page views and session length, a metric for measuring customer interest. Cost per click (CPC) and impressions share are two other big metrics to track for keyword targeting. For every impression you can generate from the keyword, you own a percentage. This can show you how you compare directly to your competitors in your keyword targeting.  

Use these SEO metrics to track how many customers view your product listings, and how your listings perform overall.  If your product listings are not on the first page/top of page or your page views and impressions are low, this is a sign of low visibility. This makes it much harder for customers to find your products and makes your marketing and ad campaigns effective.  

If your brand isn’t on page 1 for a given keyword, redirect ad spend from that keyword and apply it to sponsored display ads or something that can more efficiently boost visibility. You should also revisit the product page itself, as poor visibility is often the symptom of poor SEO. 

Action step: Optimize listings for SEO to boost visibility.   

By making listings easier to find, brands can generate a significant lift in sales and conversion rate for the simple reason that more customers are able to see these product pages. We cover this topic in our blog, Amazon Listing Optimizations: How to Conquer the Category. This action has a positive feedback effect: the higher your conversion rate, the better your chances of moving up in the ranking, and the more visible you become, which usually leads to a higher conversion rate. Compare general SERP ranking for ASINs before and after optimizations to determine the effectiveness of these changes and analyze whether or not further optimizations are needed. 

Lack of Engagement 

All the visibility in the world won’t matter if customers don’t engage with your listings. Analyze the metrics on your existing content by looking at click rate and conversions. If these metrics are poor despite high impressions and page views, it means the content on your page is failing to connect with the customer.  

As discussed in the podcast, Using Emotional Targeting to Optimize Conversion Rates, traditional optimization efforts to boost CTR often fail because they do not take into consideration the customer’s emotional journey. Humans aren’t search engines: they make purchases based on emotion, not how optimized your keywords are. Your listings must therefore balance the logical requirements of SEO algorithms with the human need to connect with the customer.   

Action step: Update content to resonate with buyers 

There are many ways to engage with buyers using content. Images and video are an excellent opportunity to go beyond keywords and tell a story. You can also use Amazon’s experiments to A/B test certain aspects of your listing, such as product title, A+ Content, or main image, to test different variables, and compare key metrics such as page views, clicks, and sessions before and after optimization.  

At Kaspien, our partners tend to see an immediate lift in sessions, sales, and conversion rate just by improving and optimizing the listing content. Use the checklist at the end of the listing optimizations post to improve the quality of your content, and use session length and click through rate to gauge success.  

Lack of Conversions   

The number one problem sellers experience is a lower than desired conversion rate, which translates directly into overall channel revenue. According to Amazon, 9.7% is the average conversion rate, and good is 10-15%. Just as an increase in conversion rates leads to a positive feedback loop, lower conversion rates negatively affect product rating.   

Factors affecting conversion rate could include everything from reviews and price points to inventory and logistics. Many brands attempt to influence conversion by expanding top of funnel awareness with headline ads, sponsored keywords, etc. As we discussed above, this is a good strategy, but if you haven’t strengthened your bottom of funnel strategies like owning the aisle, building a brand halo audience, and brand protection, all that traffic goes to waste.  

Action step: Strengthen bottom of funnel strategies.  

Just because a buyer is in your funnel does not mean they’ll buy your product. If you have a ton of impressions, page views, and CTRs but your conversions rate is low, flip the funnel on its head and focus on retargeting campaigns for brand halo shoppers and sponsored display ads to attract those customers who are ready to convert. Engage with your customers and ask for reviews to boost brand and product credibility. Once you’ve built the bottom of the funnel and you see the change in your conversion rates, start moving up.  

How to Use ACOS Amazon Metrics to set Goals 

As we’ve already discussed, a nearly universal goal is to grow topline sales, and if you use your metrics in the goal-setting process, measuring and anticipating growth becomes a predictable, mathematical process.  

Every brand needs a certain number of page views before a shopper buys a product. You can set channel revenue targets based on current page views and revenue and calculating how many page views it would take to reach that goal. For example, if a page receives 30,000 views on a monthly basis and generates 200K in revenue and the goal is to get to 300K, then the goal would be to get 45,000 views.   

Amazon conversion rate is the ultimate factor in determining how much traffic a brand needs to drive, and in the above example the conversion rate stays the same. This demonstrates how a brand could set goals, implement different campaigns, and measure the effectiveness of these strategies without ever having to worry about changing the conversion rate. Knowing which levers to pull to create more sales can be learned through monitoring these performance metrics and is one of the primary benefits of working with an Amazon agency. 

Using Metrics to Boost Performance 

One of the newer marketing metrics is New-to-brand (NTB) sales, defined as a shopper purchasing a product for the first time in the last 365 days. Tracking this metric can be helpful in building a brand halo audience (BHA), a population of shoppers who make purchases multiple times.  

The goal of any growing brand is to create as many new shoppers as possible and keep them loyal. If you drive more NTB customers through the funnel and retarget them with campaigns that make sense for your products, you’ll get more organic sales from repeat purchases. This builds a very, very strong foundation for growth. Brand Halo shoppers are also more likely to purchase new products from a brand they already trust. If a brand is launching a new product, you can target these customers on whatever platform they are using. 

What’s the best ad type to create this brand halo audiences? As Kaspien knows from tracking Sponsored Display Ads metrics, 60-70% of these ad sales are new to brand. We can therefore help our partners use sponsored display ads to make sure NTB shoppers stay loyal to the brand. Over time we find these shoppers will come to Amazon and purchase from the brand organically, which means we don’t have to spend money marketing to them and can focus our ad spend elsewhere.  

Amazon Conversion Rate Optimization: Are Your Efforts Paying Off? 

If you’ve optimized your listings, updated your content, and strengthened your bottom of funnel strategies, all that’s left to do is look at your performance reporting to see if your efforts translate into better conversion rates and more sales. While it’s possible to see a boost in sales within the first week, let the changes you’ve made sit for at least 2-3 weeks before making any new decisions. This gives the algorithm time to index the changes, and it gives you more data to look at before you take a new approach.  

Although it remains one of the most popular marketing metrics to track, many campaigns live and die by their ACOS Amazon score and ignore other metrics. Amazon ACOS is really just a tool for measuring the relationship between your ad spend and your total sales. The real magic happens when you start using your metrics to set goals and measure the effectiveness of optimizations and strategies. 

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